Finland, Sweden hit by record official recessions in 2009

HELSINKI: The blast of the global downturn hit Finland and Sweden with the worst recessions for more than half a century last year, official data showed on Monday.

The Finnish economy took a tremendous blow, shrinking by 7.8 percent and in Sweden gross domestic product shrank by 4.9 percent.

Both figures were worse than expected, and analysts worried that recovery in Finland seemed to be lagging.

Statistics Finland declared: "The fall in output is the largest for an individual year since 1917 and 1918."

The volume of exports fell by 24 percent, and GDP fell by 7.8 percent from the 2008 level to 171 billion euros (232.9 billion dollars), the preliminary data showed.

In neighbouring Sweden, the recession marked "the largest annual fall since World War II," Statistics Sweden said.

Last December the Finnish finance ministry said it expected GDP to fall 7.6 percent in 2009, while the Swedish central bank said it foresaw a 4.5 percent contraction in the Swedish economy this year.

However, in Finland observers said that the greatest concern was that the recovery appeared to be coming at a slower pace than expected.

"We knew this would be a terrible year, so the fact that the drop was 7.8 percent is not what's essential. What is essential is that the GDP didn't change in the fourth quarter" compared to the third quarter, Handelsbanken Finland analyst Tiina Helenius told AFP.

"Overall, the figures indicated that recovery is slow ... This year's growth will depend strongly on how Europe recovers and how exports recover, and how these impact domestic sentiment," she said.

In the fourth quarter of 2009, Finland's economy was flat compared to the July-September period, but its GDP fell 5.1 percent year-on-year, Statistics Finland said.

The agency said that Finnish GDP had grown by 0.3 percent in the third quarter of 2009 from output in the second quarter. But however revised the third-quarter figure on a 12-month comparison to a drop of 8.9 percent, better than an estimated fall of 9.1 percent given in December.

Finland fell into recession in the last quarter of 2008, and its economy did not begin growing again until the third quarter of 2009.

Finland and Sweden are members of the European Union, and Finland is also a member of the eurozone.

The Finnish economy is heavily reliant on exports and has been hit hard by the global economic downturn that has trumped demand for its main export sectors of paper, mobile phones, wood and industrial equipment.

In Sweden too, observers pointed out that Monday's GDP figures were worse than forecast.

"The numbers were weaker than we had expected," Handelsbanken analyst Sefan Hoernell told the TT news agency, pointing out that Sweden might not see a true recovery until the second half of the year.

Sweden, which spent more than a year in recession between 2008 and 2009, meanwhile saw its economy contract 1.5 percent in the fourth quarter on a 12-month comparison, while its GDP slipped 0.6 percent compared to the July-September period, the statistics agency said.

"It is a little worse than we had expected, but it is not pitch black," SBAB analyst Tomas Pousette told TT, adding that the worse-than-expected figures might prompt the Swedish central bank to delay an expected increase in its key interest rate from the record low rate of 0.25 percent.